The hunt for money can be exasperating. Venture investment is down. Commercial loans are harder to secure. Maybe it's time to turn to your local university for VC money.

A 2010 report from the University of Oxford located 17 student-run venture funds at schools such as New York University, Miami University, Pennsylvania State University, University of California, San Diego and Yale University. Some of the efforts are backed by the schools, while others are funded by a combination of university investments and stakes from VC firms. The report found that although these funds list education as a primary objective, they're thirsty for viable deals that will yield impressive returns.

Each fund's management strategy and investment criteria differ. Some are run like traditional venture funds: The University of Michigan's Wolverine Venture Fund, which claims to be the nation's first student-run venture fund, has invested in more than 20 companies in life sciences, alternative energy and information technology. Other funds act more like business accelerators. Stanford University's Stanford Student Enterprises (SSE) Labs offers stipends for management teams and sometimes a small upfront investment, typically about $10,000 to $15,000, says Stanford graduate student Cameron Teitelman, founder and co-managing director of SSE Labs. But it also offers office space, legal counsel, mentoring and other support for fledgling companies. SSE Labs takes no equity stake, although the business must have at least one Stanford student or alumnus with an equity stake as part of the team.

Diana Benedikt, founder and principal of Venture Insight Advisors, a Mill Valley, Calif., entrepreneurial advisory services firm that helps startups, warns that student venture funds may have their drawbacks, including lack of advisory experience. "The counseling that venture capitalists do is as important as the money," she says.

"Experienced VCs have contacts and connections that help you advance your business. While you may have some faculty available to you, you really need to look at who will be acting in an advisory capacity."

In addition, most of these funds make small investments. So, if you're looking for bigger money and guidance from seasoned entrepreneurs, a more traditional venture fund may be a better fit. However, if you have a connection to the school and you need a small infusion of cash, these funds could be an option worth exploring.

Gwen Moran

Gwen Moran is a freelance writer and co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010).